FAA Doesn’t Allow for ‘Wholly Groundless’ Exception, SCOTUS Rules Supreme Court upholds broad scope of arbitrators to decide arbitrability in one case, then limits it in another

In his first Supreme Court opinion, Justice Brett Kavanaugh used only eight pages to strike an argument that some litigants used to get a dispute out of arbitration.

On Jan. 8, the Supreme Court ruled unanimously that a “wholly groundless” exception to arbitrability is inconsistent with the Federal Arbitration Act. Commercial litigators say the court’s decision, while unsurprising and straightforward, should have companies revisiting their arbitration agreements to make sure they clearly spell out who gets to decide whether a dispute is arbitrable.

A week later, the Supreme Court would uphold an exception in the FAA for transportation workers in a decision that, albeit more limited in scope, was a rare ruling against an employer seeking arbitration.

In the case dealing with the “wholly groundless” exception, Henry Schein, Inc. v. Archer and White Sales, Inc., the dispute arose when the relations broke down between dental equipment distributor Archer and White and an equipment maker’s successor-in-interest, Henry Schein. Archer and White sued Schein for antitrust violations in federal district court. But Schein moved to pull the suit from district court into arbitration, and Archer and White objected. The question then became who decided whether the claim was arbitrable — the district court or the arbitrator?